Monday, February 1, 2016

[ABX] update and cautionary tale

In the backlink I  pointed out the ABX breakout that was under way.  Today I want to point out a potentially dangerous short term setup for traders.  This caution is driven by the presence of what might well turn into a unicorn horn on ABX .  Not only that but look where it spiked up to but could not, so far, break out of.  That's right, the level of red 1.  If this chart had been able to poke into red 1 then the potential that we are still working on a 4th wave would have been destroyed.  I never ignore these signs!!  The herd ran right up to the bank of the river but instead of just plunging headlong in, it balked at the 1 yard line.

The safe and conservative thing to do is to take profits on NUGT into today's strength (which I just did) and then make the market convince me that the trend reversal has really begun and that there will not be a deep vee 2nd from here.  Right now we just don't have that proof and in fact the whole move off the bottom still looks very A-B-C-ish to me.

I am not saying this will not break out; it well might!

What I am saying is that selling now and then only buying back if it can break back into the region of red 1 only exposes us to a lost opportunity cost of a few percent of upside while avoiding the very real danger of a big pullback with us in the shares.  This is how the odds player sees it and when gambling, what else matters except for the odds?

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